Barratt Development Account Information Analysis

Examining the importance of accounting information as well as the accounting systems of information within Barratt Development

Abstract

The accounting systems and information about them (AIS) in the current information-driven age play an essential role in providing decision-makers with the correct financial information of the company and the activities that are required to achieve strategic goals. Accounting professionals, who are people who distribute accounting information, must ensure that the information that they give to decision-makers like executives, managers, and the board of directors is accurate in order to reach organizational goals or monitor performance and amend strategic goals when necessary. Sometimes, the information provided by accounting is not so useful, and may even have an impact negatively on the people who use it. This is because of numerous problems that affect accounting information and systems, including authenticity, integrity, and the quality of the data generated. Because of this, businesses must develop and maintain accounting systems that align with their business goals to ensure their integrity, effectiveness, and transparency, in order to keep away ethical conflict, legal and business. In the following assessment, the researcher will demonstrate the significance of accounting information and the accounting information systems within Barratt Development Plc, with particular attention to how the introduction of accounting information systems that are computerized impacts questions of integrity, quality, and trustworthiness.

Barratt Development – Overview

Barratt is among the biggest home builders in the United Kingdom. Established in 1958, the firm today is an expanding network of divisions across the UK. The size and breadth of Barratt’s structure are evident from the number of resources it has and the innovative projects it offers to the communities it serves. Barratt boasts market share, with a specialization in “creating high quality, value for money homes for sale, rent and shared ownership, often in partnership with local authorities, housing associations and others” (Official Website 2007). The majority or 80percent of the projects are built on recycled brownfield land. This dedication to sustainable development is in line with the government’s plan for the future for sustainable development and innovating with regard to construction and homebuilding (Official website 2007).

Although the business was founded over forty years, it has been expanding at a rapid rate. Since it was listed on the London Stock Exchange in 1968, Barratt Development Plc has had a record-breaking turnover. In the year 2006, the company reported a total turnover of PS2,431 million. It has 33 operational divisions around the country that serve all segments that make up the marketplace, Barratt is considered one of the largest builders’ associations in the development and planning of the country’s housing industry (Official website 2007).

According to the executives of the company, the reason for Barratt’s success is its wide geographical reach and its extensive range of products. Barratt has made sure that the sales of its homes and structures are in line with the market average that appeals to a range of buyers while maintaining high-end quality throughout the construction. Additionally, Barratt does not believe in being stagnant or just following the other players. In fact, a large part of its success is in its capacity to grow by embracing new ideas and utilizing green technologies to create projects that are less expensive, provide more value for both the environment and the customer, and can be tailored to the needs of the user. Concerns related to energy efficiency as well as health and safety and energy efficiency are taken seriously (Annual report 2006). With a team of experts on the side, the Barratt management is confident about its results and has succeeded in generating worth for shareholders and its stakeholders.

Role of Accounting Information and AIS at Barratt Development

The advent of the digital age and the globalization of markets has created the need for organizational systems to manage information and knowledge. In the context of finance, the digital information reporting system is now a bridge between the various units within the company. It is through this web of information that companies can utilize data to make individualized decisions in management. Accounting information systems facilitate the process of information supply to integrate financial information, including reports that are not standard management decisions. The AIS is now the manager’s knowledge source through which organizations use their information for various purposes within decision-making models (Bhimani 2003). So, AIS can be defined as a subsystem within the information system within the company that uses quantitative data processed to provide data to the group of individuals who share similar information requirements and to help them understand the organization’s activities and to aid in decision-making. Accounting information is data that is transformed into information with the intention of making decisions (OpenLearning ).

This idea can be demonstrated through the study of Barratt Development and its AIS. Accounting information from Barratt serves a range of people, but primarily those in direct contact with the business. At the highest level of decision trees director’s boards that have to oversee and direct the company are the primary people who use accounting information. Accounting data can be used to analyze the trends in revenue and losses, including pre-tax profits group activities, cash flow, capital employed, forward order books net assets, land and interest rates, sales prices, volumes of sales, business as well as earnings per share to assess the performance of the company. They base their analysis on their future plans and the kinds of projects they are focusing on, the type of resources they intend to utilize, as well as the types of risks that are involved within the company (Annual Report 2006).

In addition to the director’s board, the accounting information is valuable to be used for monitoring other groups of individuals, as members of the auditing committee. They analyze the credibility of financial statements in the order in order to assess their relationship to the overall performance of the company. They are also accountable for analyzing their financial reporting and management system to make sure that the accounting procedures, systems of control, and procedures comply with the requirements set by the regulatory authorities (Annual Report 2006). Accounting data also provide an important status on the type of financial transactions which have occurred with suppliers, as well as the terms for repayment, and the amount of debt the company has without jeopardizing the integrity of the company.

Following that, the Board of Directors, the auditors as well as the creditors The managers and executives are the individuals who utilize the accounting data. They use accounting data to evaluate the performance of their operations and how they can improve it by implementing strategic plans. Accounting data provides information relating to any gaps or problems caused by the capabilities as well as resources and financial limitations that limit the utilization of resource efficiency to meet organizational goals and goals (Annual Report 2006).

Other users of accounting data are also investors and speculators who are interested in analyzing the performance of the business regularly to protect their interests. Information about profits per share pricing of shares profits, rates of return, and the announcement of shares that are being put on the market are all helpful to shareholders in making investments.

Alongside the mentioned primary decision-makers, accounting information is also utilized at the operational level to inform about bonuses, salaries, benefits, and pension benefits and also to ensure that divisional managers can assess the state of receivables and inventory and cash flow including land, assets, taxes, and payables, etc. which can affect the overall condition of projects.

The accounting data the individuals use can be processed through an accounting system that creates information from everyday transactions, such as invoices, receipts for sales and payment slips, tax forms, salary slips, supplier slips for transactions, trade receivables, etc. The AIS includes sub-sub systems designed to be based on accounting standards, such as inventory management system and supply chain systems, sales proceeds systems and human resource systems, and capital investment methods. It is AIS is also built from various internal transactions which are recorded within these systems. Therefore this AIS in Barratt Development is based on both external and internal accounting information processing.

Accounting Information Strategy at Barratt Development

While AIS was in use within companies since the beginning of accounting, it is often interpreted as computers that perform the accounting functions. The primary function of AIS is to gather information, process, and record data that are related to organizations (Stefanou 2006.). The information resulting from it can have implications for maintenance, decision-making, and communication between the external and internal stakeholders, according to the impact of environmental variables as well as social, technological, and organizational aspects. As per Stefanou (2006) the accounting data and information systems are crucial for companies to adapt to dynamic and competitive business environments, which often change the production process as well as organizational structure. In this regard information systems like AIS can play a significant role in helping to manage change and allowing cross-functional demands.

At Barratt, the company has hired Weber Shandwick Square Mile as the financial PR expert to design a communications framework specifically designed to communicate details to stakeholders and shareholders throughout the day. This step toward transparency is hampered by the firm’s policy to release confidential financial information to the general public without the express consent of the Secretary of the Company. The company believes this approach helps ensure that crucial accounting data is only disclosed to those who are truly concerned, like shareholders, investors, as well as analysts (Annual Report for 2006).

Barratt’s AIS is based upon the International Financial Reporting Standards, is compliant with the Companies Act of 1985, and employs generally accepted accounting practices. In accordance with GAAP, the business must also report estimates and assumptions that impact the overall financial performance of the business specifically on the liabilities and assets, in addition to the reporting of expenses and revenues. Accounting information is based upon the management’s perception of the amounts, activities, estimates, and actions, and their effect on the overall performance of the business. In this regard, Barratt takes into account the results or estimates of holding companies as well as its subsidiary companies which are included in its financial statements in order to document revenues, expenditures, liabilities, assets, and cash flows. In the case of estimates of costs, the company includes labor, materials, and overheads for the work in progress. In the same way, when taking into consideration property, plant, or equipment the business includes deferred purchase credit terms as well as expenses, less depreciation on these assets (Annual report 2006). Accounting information management and development is essential to ensure intra and inter-organizational dissemination of information. The accuracy of information is essential to aid decision-making across the company and also in order to make sure that the accuracy of data is essential to the effectiveness of the operational processes. With the help of GAAP rules, a firm’s decision-makers can manage and negotiate costs when determining the cost price as well as the selling price and the price for service of its products on the marketplace. It is also crucial for decision-makers on the level of divisions to evaluate the financial consequences of any project they undertake and, consequently, assess its importance to the overall organization strategy. In smaller organizations, it is simpler to concentrate the control mechanisms like cash management, monitoring performance, and keeping relationships with external organizations (Collis Jarvis 2002). Jarvis 2002). In larger organizations like Barratt in which holding companies as well as supply chain, subsidiaries, and other value chain elements are linked to the operations of the company Accounting estimates, although they provide a sketch of the financial situation, however, they do not give the most accurate information about the financial condition (Ramos 2004).

In addition, because of the evolving business environment and the trend, conventional notions of control systems don’t provide a clear understanding of and control the factors that impact companies. Bhimani (2003) believes convinced that the management strategies of today require a balanced approach from all the units in the organization’s framework, which is linked through an effective network of communication, that focuses on knowledge and information transfer. Any information system should facilitate monitoring and evaluation of information. Boland (1999) also is of the opinion that information systems, such as the AIS should be present within the company to generate reports, assist in the regeneration of reports and decision-making systems, improve workflow, and serve as the ability to inquire. Thus the AIS must be a part of the organizational management system (Stuerke 2005). In the beginning, Barratt maintains an effective financial information system that provides current and accurate information to the business in order to keep track of investor relations. There is no doubt that information on earnings estimates, capital returns, public announcements of financial results, and similar information is readily accessible at the touch of a mouse on the Barratt investor relations website. The goal of this site is to streamline the processes of analysts, investors, and traders so that they can participate in the trading of Barratt’s shares as well as Securities (Barratt The Official Site 2007).

In addition, one can observe that Barratt has utilized their financial data system in order to regulate and manage its corporate governance. Through this, it establishes guidelines and standards for maintaining its relationships with shareholders, employees, customers contractors, suppliers, and other stakeholders. It is because of its corporate governance policy that the business can create an operating plan, budget, and financial statements, select projects, and conduct acquisition as well as disposal of business units as well as track the business’s performance, establish internal controls for the management of risk and ensure that there is transparency across the company (Annual Report 2006).

A successful information system depends on regulatory authority. This body examines and monitors the effectiveness of the application of strategies and policies. A system for managing information that holds sensitive information, like financial information, is not worth it when there aren’t periodic checks or balances. In the context of financial transactions, the process is done by the auditors. As a result of the breadth as well as the size firm, Barratt has two groups of auditors: external and internal. Audit Committee (internal) Audit Committee (internal) comprises directors with years of experience in the field. They are responsible for ensuring the efficiency of the auditing process, financial management, and reporting systems, and making sure that the integrity and efficiency of the accounting procedures. Internal controls are reviewed on a regular basis to identify potential risks or issues in the audit process. An external auditing company, PricewaterhouseCoopers LLC has been engaged to authenticate the validity of the internal audit committee’s reports (Annual Report 2006). This isn’t a new approach regarding the evaluation of the company and monitoring.

Alongside the auditing committee, Barratt’s Directors are also responsible for protecting the company’s assets through monitoring for irregularities and fraud within its financial system and operations. The responsibility is controlled by internal control and control system for risk management. Although this process might be efficient in the definition of the risk control procedures and reporting but it is restricted by the power of the directors who review, report, and review the financial data distributed at annual and interim meetings. Directors are a privileged group of individuals who are accountable for the openness of the company’s entire accounting system. When it comes to the viability of land for acquisition or work in progress and subcontractor payments, for example. The executive directors are reliant upon an “input” system, which is managed by divisional heads. The accounting of sales, purchases, and acquisitions is authorized by divisional heads as executive directors rely on the divisional units to ensure the authenticity of their own reportage. Therefore the researcher believes that the system provides an adequate level of assurance. The danger of fraud cannot be guaranteed at any level since the controls and checks are confined to top executives only.

Conclusion

In the previous discussion, we can see that, although technology has changed the accounting system it’s built on the same foundation. Traditional accounting principles such as authenticity, reliability, and integrity of data for the purpose of making decisions remain the same. The entire process of collecting and processing information about accounting to generate data serve to ensure accountability and verification of the elements of a production as well as the work-in-progress efficiency of the business. What’s changed is the importance of the AIS as an intro and inter-communication framework for shareholders and stakeholders. This is evident in the study above from Barratt Development, one of the UK’s leading house-building companies. Barratt built on its operating infrastructure, has created a sophisticated financial information system that is governed by procedures, policies, and guidelines for its management. The management has appointed its top decision-makers (its directors) as “gatekeepers” for monitoring, monitoring, and safeguarding financial data. It has adopted standard accounting standards for reporting and accountability in order to provide stakeholders and shareholders with access to accounting data to make decisions that impact the company. But, when one looks at the accounting system, it’s filled with holes that could compromise the quality and integrity of the information that it offers the users. In the end, researchers are convinced that AIS cannot ensure the accuracy, reliability, or quality of data regardless of the type of system that is used. What is required is a system of check and balance that is integrated with AIS and at every level of the company to guarantee the independent authenticity of knowledge management and information.

Bibliography

Barratt Official Website. Company Profile. Online accessed on 20 January 2007 from: http://www.barratt-investor-relations.co.uk/corporateoverview/companyprofile.aspx

Barratt Report and Accounts 2006.

Bhimani, A. (2003) Management Accounting in the Digital Economy. Oxford University Press: Oxford.

Boland, R. J. (1999) “Accounting as a Representational Craft Lessons for Research on Information Systems” in Rethinking Management Information Systems: An Interdisciplinary Perspective, Currie, W. and Galleries, B. (eds) Oxford University Press: Oxford. pp. 229

Collis, J. and Jarvis, R. (2002) Financial Information and the Management of Small Private Companies. Journal of Small Business and Enterprise Development, Vol. 9, No. 2 pp.100-110

Ramos, M. M. (2004) Interaction between management accounting and supply chain management. Supply Chain Management: An International Journal. Vol.9, No. 2, pp.134-138

Stuerke, P. S. (2005) Financial analysts as accountants’ users. International Journal of Managerial Finance Vol. 1 No. 1, pp. 8-24

Barratt Report and Accounts 2006.

Barratt Official Website. Company Profile. Online accessed on 20 January 2007 from: http://www.barratt-investor-relations.co.uk/corporateoverview/companyprofile.aspx

Bhimani, A. (2003) Management Accounting in the Digital Economy. Oxford University Press: Oxford.

Boland, R. J. (1999) “Accounting as a Representational Craft Lessons for Research on Information Systems” in Rethinking Management Information Systems: An Interdisciplinary Perspective, Currie, W. and Galleries, B. (eds) Oxford University Press: Oxford. pp. 229

Ramos, M. M. (2004) Interaction between management accounting and supply chain management. Supply Chain Management: An International Journal. Vol.9, No. 2, pp.134-138

Collis, J. and Jarvis, R. (2002) Financial Information and the Management of Small Private Companies. Journal of Small Business and Enterprise Development, Vol. 9, No. 2 pp.100-110

Stuerke, P. S. (2005) Financial analysts as accountants’ users. International Journal of Managerial Finance Vol. 1 No. 1, pp. 8-24

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